Depending on the charting package that you use, you may have been intrigued to see the name Heikin-Ashi as one of the options. Heikin-Ashi is Japanese for “average bar”, and the method of plotting is a way to smooth out the fluctuations that you typically see with normal candlestick charting. In use, you would need to see both charts as the Heikin-Ashi is not a substitute for a normal price chart, but simply provides a different window on the information.

The open-close-high-low prices are plotted in the same way as a regular candlestick chart, but they are calculated in a different way rather than simply being at the prices that were traded. For convenience, I’ll refer to them as the HAopen, HAclose, HAhigh, and HAlow.

The opening price HAopen is calculated from the previous day, and is the average of the previous day’s HAopen and HAclose. Basically a different description of where the price was reckoned to be by the market previously, and therefore leading into the present day.

The closing price HAclose is the average of the current bar’s OHLC, the actual trading prices for today. Once again, you can view this as a description of where the market thinks the price should be on this day, and therefore the settled closing price.

Having defined the HAopen and HAclose, the other two are easy. HAhigh is the highest of the actual high price, the HAopen and the HAclose. HAlow is the lowest of the actual low price, the HAopen and HAclose.

Incidentally, you can see that you need a Heikin-Ashi calculation of the previous day to even draw the charts properly. However, if you start with conventional values for the first day plotted, it will rapidly fall in line with the true HA values.

The result of this blending of prices is that the candles drawn are much more indicative of the trends. Here is a normal chart for BAE Systems –

Member Login

Candlestick Reversal Patterns

Major Candlestick Reversal Patterns
Learn and master these powerful reversal patterns with "Candlestick Trading for Maximum Profits". You'll also learn to find these patterns when they are … [Read More...]

Latest Video

Affiliates

Candlestick Trading for Maximum Profits Partnership Program
Earn 50% on Every Sale
We’re looking for quality financial partners to help spread the word about Candlestick Trading for Maximum Profits!
Earn 50% Commission
Click Here to Read How we can Help Each Other

Footer #4 Widget

This is an example of a widgeted area that you can place text to describe a particular product or service. You can also use other WordPress widgets such as recent posts, recent comments, a tag cloud or more.